Be specific about the loan you want. The more precise you are, the easier it will be for a loan officer or mortgage broker to find the best rate. For example, do you want a 15-year or 30-year mortgage? Do you need a "jumbo" mortgage (more than $333,700)? Are you willing to pay points to reduce the interest rate? The answers to these questions will depend on several factors, including when you plan to sell the house and how soon you want to retire your debt. Only you know the answers, but the sooner you know them, the better.
Don't escrow taxes and insurance. Unless you're undisciplined, avoid putting monies in escrow to cover your property taxes and homeowner's insurance. There's usually a fee for this privilege that runs under 1 percent of the loan amount, in states where it's allowed. "Paying the fee will allow you to time your tax and insurance payments to your benefit," says Bank South's Steve Austin. For instance, you may be able to prepay taxes that are due next year and use those payments to reduce your current tax bill. Moreover, you get to hang onto your money longer. That may be an advantage when interest-bearing accounts start paying more.
Refinancing can be the right move to improve your financial situation, but be careful. Making the wrong move can put you much worse off. Smart and simple choices will go a long way toward keeping you financially secure.
Weigh the costs carefully of how long you will be staying in your home vs. how much of a savings you will be getting in a refinance. Make sure you include closing costs in your decision.
Refinancing can be the right move to improve your financial situation, but be careful. Making the wrong move can put you much worse off. Smart and simple choices will go a long way toward keeping you financially secure.
